Kent Reliance BS to raise £50m in radical restructure
by Gill Montia
Struggling Kent Reliance Building Society, which has secured an injection of cash from private equity firm, JC Flowers, has announced a restructure that should allow its members to remain part of a mutual organisation.
The Society is proposing to create an industrial and provident society, to be called Kent Reliance Provident Society Limited (KRPS).
It will then transfer its assets and liabilities, which include members’ savings, investment and mortgage accounts, to a new bank that will operate as a subsidiary of the new entity.
JC Flowers will provide £50 million of capital to the bank immediately following the transfer, and will receive ordinary shares and convertible preference shares in return.
While KRPS will be the major shareholder in the bank, the Society has warned that this position could change in the future.
The scheme will hopefully come into effect in 2011, although Kent’s members will need to agree the changes at a special general meeting to be held this autumn.
The Society’s chief executive, Mike Lazenby, comments: “Recent pressure on KRBS’s capital has proved challenging, particularly as building societies cannot currently raise capital in the way banks do.”
He adds: “To meet this challenge, we have been working with a team of advisors to produce a structure that enables new capital to be introduced, whilst simultaneously providing a basis which can allow our members to remain as members of a mutual organisation.”